Problem: Your company is considering three mutually exclusive projects. Project A will expand the existing business operations in the current location. Project B will expand the existing business operations to the adjacent county. Project C will expand into a new business operation that is not related to current business operations. Surprisingly, the projected financial cash flows and the analyses of these two projects yield exactly identical results:
Project A Project B Project C
NPV @ 15% $12,100 $12,100 $12,100
IRR 25% 25% 25%
Payback 2.7 yrs 2.7 yrs 2.7 yrs
How should your company determine which project to select? Are there non-financial considerations that should be taken into account? Are there additional financial analyses that should be performed?